Smartphone Growth – A Driver Of Ecommerce In Latin America

Latin America

Smartphone adoption has grown rapidly in Latin America, according to a report by GSMA, which also went on to describe the potential for further growth in the future. The Latin American market is quite diverse with some countries already at high smartphone penetration rates, but other markets still in their infancy.

The rapid growth of smartphones has helped the growth of e-commerce. The expected continued growth of smartphone adoption in the region offers the potential for e-commerce to continue to grow.

Currently, MercadoLibre (MELI) is one of the leading e-commerce platforms in Latin America. Continued smartphone adoption may help MELI to continue to grow.

Investors may gain access to e-commerce in Latin America through direct investment in companies like MercadoLibre, online payment platform Pagseguro Digital (PAGS), online travel firm CVC Brasil (CVCB3), and e-commerce company B2W Cia Digital (BTOW3), among others.

Where Are We Now?

There were 442 million unique mobile subscribers across Latin America and the Caribbean, accounting for 68% of the population, as of mid-2018.

However, the region is characterized by varying levels of mobile subscriber penetration. A number of countries, such as Chile, Uruguay, and Argentina, are approaching saturation of the total addressable market, while others, including Honduras, Guatemala and Nicaragua, still exhibit relatively low levels of penetration, highlighting potential growth.

Potential For Growth

Latin America may account for 10% of all new subscribers globally out to 2025, and that by 2025, around three-quarters of the region’s population will subscribe to mobile services, closing the gap on the average for developed markets, which is 87%.

Higher Speed Internet May Enable More Sophisticated Internet Use

Currently, most of Latin America is still operating on 3G networks. However, adoption of 4G has progressed rapidly with 35% of the region on the platform. Furthermore, nearly 2/3rd of the region will likely be on 4G by 2025.

The introduction of 5G is not expected until, at least, 2025.

Smartphone Adoption Has Added To Economic Expansion

In 2017, mobile technologies and services generated 5% of GDP in Latin America, a contribution that amounted to $280 billion of economic value added. By 2022, the mobile economy in the region may generate around $330 billion of economic value added (or 5.2% of Latin America’s GDP).

And May Further The Digital Economy

The number of Internet of Things (IoT) connections in Latin America and the Caribbean may triple between 2017 and 2025, reaching 1.3 billion. The majority of these connections will probably be in the consumer segment, due to increased adoption of connected devices within homes.

The increased smartphone adoption in Latin America may also spur the availability of more online content. GSMA’s survey revealed that millennial smartphone users in Latin America are among the most engaged users of free-to-access online video services for their age group globally. Content providers will likely continue to push to increase their penetration in Latin America.

The Leapfrog Effect

Instead of transitioning away from laptops, as is the case in developed nations, many consumers in developing countries are gaining their first exposure to the internet via the smartphone. As such, the growth of smartphone adoption has helped e-commerce in Latin America and may spur further growth in the future.

Companies Currently Involved In E-commerce In Latin America

MercadoLibre was the most popular e-commerce site in Latin America during 2018. MELI operates an e-commerce platform as well as its own payments platform to facilitate both on and off-network payments.

B2W (BTOW3) is also one of Latin America’s leading e-commerce platforms, operating an online marketplace, discount site, and finance platform. B2W is majority-owned by publicly traded Lojas Americanas (LAME4), which is one of the largest traditional retail chains in Brazil.

CVC Brasil Operadora e Agencia de Viagens (CVC) is a leading travel operator in Latin America serving Brazilian consumers. CVC operates both physical and online travel stores.

PagSeguro Digital is an online payments platform which facilitates e-commerce.

Summary

Smartphone adoption has grown rapidly in Latin America. Furthermore, it is expected to continue to grow in the future. Companies such as MELI, PAGS, BTOW3, and CVC may benefit if the expected growth in Latin America is realized.

Disclosure: I am/we are long MELI, BTOOY, CVCBF, PAGS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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